Third, there’s no evidence at all that companies can necessarily pass on all tax they pay to customers. If they can then it is very obvious that competition is not working – because if it were that would not be true. So free-marketeers can’t have it both ways. Either competition prevents generic passing on (generic VAT rises perhaps apart) of the fact that tax is passed on proves that monop[oly power is in operation and a bigger issue arises of tackling it.
Ever since Seligman (in 1899 for fuck\’s sake, think it would have sunk in by now) the question has not been how much of corporation tax gets paid by customers. It is how much gets paid by the workers in the form of lower wages and how much by shareholders in the form of lower returns to capital?
And we know what the defining factor is too: the relative mobility of capital and labour.
What makes Ritchie\’s position on this so damn fucking stupid is that if he actually paid attention to what was being said (rather than the voices in his head) then he would realise that this simple and obvious truth actually bolsters part of his case.
The way to make sure that shareholders, capital, actually bear the incidence of corporation tax is to do one of two things.
1) Impose capital controls so that capital can only be invested domestically.
2) Have a single worldwide corporation tax base and tax rate.
I\’ve definitely seen him argue for the first and he\’s similarly certainly implied the second.
Either would mean that capital, not workers, bear the incidence of corporation tax. If he would just manage to grasp the simple thing that all economists are shouting at him he would therefore have a good argument to do either of these two things that he wants to do anyway. But no, he prefers to wallow in ignorance on the point and thus miss an argument he could use to his own benefit.
And finally, if real markets existed then shareholders would pay the cost of extra tax just as right now the benefit of that abuse does not flow to customers but goes instead to shareholders.
Dear God, you stupid boy. It is that there are markets, different markets with different tax levels, for capital which means that capital does not carry the full burden of corporation tax. That\’s why, to make them do so, you have to eliminate those markets: either stop them moving to another market with capital controls or remove the market by having one global corporation tax.
He\’s got entirely and absolutely the wrong end of the stick.